Good day, and thank you for standing by. Welcome to Coface First Quarter Results Presentation. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question-and-answer session. To ask a question during the session, you need to press star one one on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press *star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Xavier Durand. Please go ahead.
Thank you very much, and good evening. Thanks to all of you for joining. Happy to report today our first quarter 2025 numbers. You all have seen from the headline, it continues to be a good story for Coface. We're reporting net income at EUR 62.1 million. The turnover is up 2% at constant FX and perimeter, with trade credit insurance growing actually 1.2%. That's an inversion of the trend that we had last year, as we've had, I think, a negative or zero activity through most of the year. Client activity is up 1.2% for this quarter. Client retention near our record at 95%. Pricing still down, but pretty much in line with the prior year and with historical trends. Strong growth continues, with business information growing almost 15%, same as debt collection. Factoring is slightly down. That's really the reflection of the industrial Germany and Central Europe business.
As you can see, the loss ratio came in at 39.1%, which is up 3.3 percentage points. That brings the net combined ratio at 68.7%, which is in line with Q4. Slightly higher gross loss ratio at 38.7%. Higher opening year reserving and pretty stable reserve releases from the prior vintages. The costs are up 2.2 percentage points at 29.5%. We continue to invest deliberately according to our Power the Core business plan, so no change in strategy, deliberate investments because we think it is actually the right strategy in what is a pretty volatile and uncertain environment. I think the company is well positioned. Total 62.1%, slightly down from last year, and ROATE at 12.7%. We have added a page on page five about the environment. I mean, it is probably pretty obvious that the environment is as uncertain as it has ever been.
On the left-hand side of the page, you can see a chart that represents the global economic policy uncertainty. We are at the stage at a very high level, driven by the U.S. move away from free trade, which has sent this index to record highs. It's very hard to see where this all settles, obviously. There's been a lot of announcements, changes, and U-turns. I think whether or not it ends up at a very high or medium or lower level, for now, we are very likely to see a negative impact on world economy and trade just because people are uncertain, and that slows down investments and spending. It also means for us as a business that we see more demand for our business proposition, whether it is insurance or short-term information.
We think that our positioning basically on monitoring accurately or as accurately as possible short-term risks, looking into details by industry, by trade corridor, by business, the expertise we have, the network we have are all extremely relevant in this environment. We think we've got the right strategy. We continue to invest deliberately to make our power of the core plan reality. If you go to page seven, just a little bit more detail on turnover. Turnover is up 2% this quarter. As I said, trade credit insurance premiums are up 1.2% at all things equal. The other revenues are up 7.5%. I've mentioned business information at close to 15%, same for debt collection, close to 15%, factoring slightly down.
Insurance fees that we collect on our insurance contract continue to perform well at 4%, bringing the total insurance-related fees to premiums ratio at 13.3%, which is a nice number. When you go to the next page, on page eight by geography, I think what you see here is really the description of the world economy with Northern Europe, Germany mainly, down from last year. Strong growth, though, in services, close to 18%. Central Europe has had a bit of a one-off with a large contract that has been reduced and transferred to an Asian region, but still negative.
Western Europe doing a little bit better with France, the U.K., and Switzerland growing at about 1.9%. Med and Africa actually continues to drive growth at 5.1%. Continued Southern Europe and dynamism in the Middle East. North America struggling along at 1.5%, Asia at 3%, and Latin America having a nice surge.
Actually, we're coming out of a period where we have been working on the risk quite a bit, and there's obviously inflation underlying those numbers in Latin America. If you go to page nine, the usual breakdown of our business, you see that there continues to be a strong new business year for us. Actually, at the level of last year, I think there's good momentum. We are seeing nice demand and nice continued growth in our direct business. We see retention at this stage at 95%, very close to our record, 95.7%. The market is competitive. People are aggressive, but at this stage, I think we are performing pretty well. The price effect is still negative. That's, as you know, the long-term trend in this business is something like negative 1.5%. So it's pretty much in line with the first quarter of 2024.
On the volume side, as I said, 1.2% is a nice change from the, I would say, the negative or slightly positive we had last year. It is a good start to the year. It is hard to say where this is going to go, obviously, as there is lots of uncertainty on the trade, as we have mentioned before. Going to page 10, you see the loss history by quarter on the top left. As we discussed priorly, insolvencies around the world continue to normalize or actually creep up slowly. The current environment is actually not helping. I would say the frequency that we are seeing is now back to normal conditions. We are seeing the same number of claims that we had seen in 2019 prior to the COVID crisis and then the subsequent events.
We see claims amount higher, though, because there's been inflation since, and that's reflected in the amount of claims that we're receiving. The severity is growing, but it is still below the, I would say, the historic average of the business. Nothing really surprising here. You can see on the bottom right-hand corner that we still are cautious in underwriting the new vintage at 82% pre-discount. We are still getting very nice throwbacks from the prior vintages at -43.6%. No change in our reserving policy, no change in our stance in the market. We are very conscious of the environment, and we are actually being very close to our clients in managing the risks, knowing that the full effects of the tariff situation will probably develop over the next part of the year.
On the next page, 11, we see the Q1 compared to the prior years. I don't think it's very relevant during the first quarter to look at this because we're comparing one quarter with full years. I'd rather turn to page 12, where we are seeing the sequence of the last five quarters that the business has gone through. Pretty much, I think what we see here is there's not much to talk about. I mean, on Western Europe, Northern Europe, Central Europe, Med and Africa, which are the largest and historically more stable markets that we operate in, you can see that the risk is really contained. It operates at levels anywhere from, I'd say, 25-50%, but very, very stable.
On the three smaller and traditionally more volatile markets that we're in, North America, Latin America, again, some claims here and there, but no real trend. As you see, for example, in Asia-Pacific, we had a low Q3, a higher Q4, and a lower Q1, sorry. Not much to report in terms of the risk side. On the cost side, on page 13, as I mentioned, we are continuing to invest deliberately in our direct origination capabilities, in our technology, in our data, and in our business services. The costs in total from Q1 2024 are up 5.7%. That brings the cost ratio before reinsurance on the bottom right from 31.7% - 33.1%. That is an increase of 1.4 percentage points. That is driven by a number of things. Investments, as I mentioned, are up, increased the ratio by 2.9 percentage points.
Cost inflation that's been embarked from the past is still there and creates 1.4 percentage points of drag. It's offset by the revenues that we get from the new business services by 2.6 percentage points. Then some growth that we had in the premiums, which lower the ratio by 0.4. The net cost ratio is up 2.2, very slightly lower reinsurance commissions. Phalla is going to take us through this. Pretty much for us, a continued investment in our expertise and our people and our capabilities, which makes a ton of sense in this current market. With that, I'm actually going to turn it over to Phalla to take us through the rest of the pages.
Yeah. Thank you, Xavier. Premium session rate, way, way close to where we were last year. What is changing is, of course, the claim session rate.
You can see the increase from 21% - 26.4%, reflecting the increase in the loss ratio that we are seeing. As a result, we're passing on less result to the reinsurer, moving from -EUR 30 million to -EUR 20 million pre-tax. This leads us to a net combined ratio of 68.7%, really similar to what we've seen in Q4 2024, with an increase in net cost ratio and increase in the net loss ratio, but still below 70%. If we move to the next page, we are now on page 16, financial portfolio. The market value of our investment portfolio stands at EUR 3.35 billion, with a high level in terms of liquid asset cash, which is 17% of the total portfolio. Of course, we are holding cash as we are going to pay our dividend at the end of this month for about EUR 200 million.
In terms of investment income, if we look at the first two lines of investment, recurring income and realized gain and loss, you can see that it is translated in the fact that we are increasing slightly the accounting yield with and without gain and loss. I think it's moving up. The new money is now well invested at 3.8%, which is slightly below the level of investment that we have last year, but still above 3%. If we move to the FX lines, I think we have, you can see the EUR -12.4 million. This includes EUR 4.5 million related to hyperinflation, mainly in Turkey, which means that the remaining part is the FX negative impact. You can see the offset, actually, of this FX negative impact in the IFI line. You can see that the IFI is moving from EUR -11 million to EUR -4 million.
Out of the - 4, you have 6 or 7 million related to realized, well, positive P&L impact on FX. It is an offset in two geographies of booking between financial results and technical results. IFI, as I said, if you exclude the FX impact, it will be pretty similar at the similar level than what we have in Q1 2024, which is more or less 10-11 million EUR. This leads us to a net income at 62 million. Still very strong net income despite, I think, the decrease versus last year, but this is driven by the fact that our net combined ratio has increased. Return on average tangible equity, we are now on page 18. Total IFRS is moving from 2,194 million to 2,234. This is mainly driven by the next net income of the period.
We have, I think, some CTA, so currency translation impact on our equity. Return on average tangible equity from 13.9% to 12.7%. Of course, we're comparing year-end return on average tangible equity to a non-life Q1. I think the impact will probably be much more meaningful, I would say, throughout the year than what we're seeing in Q1. You know that we don't disclose any solvency in Q1. What we can say is that it will be anyway above the upper range of our comfort zone. Xavier, throwback to you.
Yeah. A relatively short presentation today. I mean, clearly, we think this is another good quarter for Coface. Combined ratio is at 68.7%. It's stable versus the Q4 of 2024. We're getting nice income from our investment portfolio. The ROATE is above our target, as you know, through the cycle. Clearly, this is a complicated environment.
I mean, not just for Coface, but for every one of our clients and every industry participant. There's been lots of announcements made. Some hikes have actually taken place and are starting to weigh. There's clearly a lot of discussions, a lot of U-turns. It's very unclear as to where exactly this settles in the end, negotiations that need to take place, etc., etc. I think when we see this, our impetus is on, one, staying very close to the action. We've really broken down the world in different segments, and we're talking 7, 8, 7, sorry, 6, 600 different segments that we look at. Looking at each individual industry's and each individual sector's impact, I think this environment justifies what we do. I mean, we have experts all over the world. We have data that we've been investing on. We have technology. We have processes.
We're very close to our clients. We're making sure that we stay current with everything that's happening in the macroeconomic environment, as well as with the individual situations of our clients. I think our strategy, which is to be really the best at doing this, investing in risk-free services, investing in our technology, in our people, in our processes, I think that makes a ton of sense. We feel we're as well positioned as possible in this environment. That's pretty much what we have for you today. A bit shorter than usual. We are going to turn it over for questions for all of those on the call.
Thank you, dear participants. As a reminder, if you wish to ask a question, please press star one one on your telephone keypad and wait for your name to be announced.
To withdraw a question, please press star one one again. Please stand by while we compile the Q&A rules. This will take a few moments. Now we are going to take our first question. It comes from Michael Huttner from Berenberg. Your line is open. Please ask your question. Fantastic.
Thank you very much. Xavier, could you give us a feel for how conservative the loss pick, the 82.2, is? It is just to get a feel. If I look at the slide, slide 10, the little blue band, which I kind of think of as the conservatives, and maybe I am wrong, is a little bit narrower than in previous year, but maybe I am wrong. Any comment here would be useful. The second is you said your number of claims is similar now to 2019, but your combined ratio is about not quite 10 points better.
I don't have the quarter, but I think in the year you were at 77% back then. You're now first quarter, 68.7%, so 9 percentage points or better. I just wondered if you could get a feel. My feeling is what's changed is that, just like you said, you focus more on clients, etc., but your balance sheet is immensely stronger than it was back then, both in terms of the mix of assets, so more fixed income, less real estate maybe, but probably also more reserving. I don't know. Any comment here would be helpful. I know you said that it's similar, but I always think of the CE as a kind of magic region. It does stand out at 51.8%.
I know you might say, "51.8, given where we've been, isn't a big variation." The previous numbers have only ever, in the past few quarters, only above 41. I just wondered if there's something there, which is unusual. Thank you.
Just on that one, one quarter ago, we were at 13, right?
Exactly. You can see it as sale region, it's only 10% of the total premium. It's still a little bit volatile. If you have one or two claims that we had, actually, this drives this big. Other than this, there's nothing unusual to be reported.
There's a couple of claims that can tilt the balance. I mean, the law of large number only starts to work for large places. Michael, I wouldn't try to read into the, I guess you're referring to the dotted blue.
Which is the discounted effect.
That's the discount effect. Oh, okay.
That's right.
I wouldn't try to read in that number anything else than the interest rate discount, the interest, the rate that we're using for the discounting, right? My comment to you on this one is we haven't changed our underwriting stance. We haven't changed our reserving methodology. There's really nothing new in these numbers as far as this quarter versus the year before or the two years before. In terms of your comparison with 2019, yes, we had the same number of claims, but the business was smaller at the time because we also have had more premiums, right? The claims are larger in amount, but so are the premiums. I think you also have to factor that part of the equation in.
If I may say, but it's not a nice word, but anyway, you did highlight the reserving points. I feel still hungry for an answer. If you highlighted it, I thought it was fair to ask. That's all. The 82.2, you actually said it's higher. That's why I asked.
I think, as I said, we haven't changed our stance, right? I think I've mentioned over this call, I don't know, time and time and time again, that we've taken a relatively conservative stance when it comes to looking at the market, knowing that a slow but steady normalization was underway for something like four years now. That hasn't changed. We continue to see normalization. I don't know if that's the right word, but we continue to see slow and progressive increase in the insolvencies around the world.
We continue to be careful about what we underwrite. We continue to reserve appropriately for whatever might lie ahead. That is it. That is all we are saying here in these numbers.
Okay. Thank you.
Thank you. Now we are going to take our next question. The next question comes to the line of Amalie Zdravkovic from Deutsche Bank. Your line is open. Please ask your question.
Yes. Hello. Good afternoon. This is Amalie from Deutsche Bank. Thank you so much for taking my questions. I just have two, if I may, and it is mainly just, I mean, on the sort of the commentary around the impact of global trade and business failures. I was just wondering if you sort of have any more color to add on sort of how this impacts your outlook for 2025. I mean, are you building any new assumptions? Are you building in potential recessions?
How are you sort of, how are you thinking about the outlook more generally? I mean, you touched a bit on—oh, sorry.
Go ahead. Go ahead. I got you.
No. My second question is just, I was just curious a bit on the demand side. I mean, you touched a bit on demand for trade credit, but I was just wondering if you could add a bit more color on sort of where in particular you're seeing demand coming from. Yeah, that would be great. Thank you.
Okay. On the economic outlook, I think, frankly, no one was last year expecting the barrage of tariffs and all the activity that took place in the first 100 days of the U.S. administration.
This has been—I mean, I'm not—this is no news for anyone here on the call, but this has been a bit of a shock to a lot of people. Clearly, there are two effects, or there's a multiplicity of effects that we think are going on. First, people in the short term probably stocked goods, so that probably increased the level of trade short term. Second, nobody knows where the tariffs really end, but I think we'll have to wait for actuals before we can form a view on how much impact there is. Today, if you think of a 145% tariff between China and the U.S., it pretty much means trade will be very, very, very difficult. It is anticipated this would not be the case, but let's say from 20% - 145%, there's a whole big world out there. It is very hard to predict.
The one thing, though, is everybody understands it's uncertain. Everybody understands it's volatile. I think after trying to protect the very short term by stocking up and making sure you did what you can for the next few months, people are probably being cautious in how they invest, how they spend. It's very hard to make an investment decision today on a factory or on anything. Our assumption is it's going to slow down the economy. I think our outlook for the world economy was something like 2.7% growth this year. We've brought that down at this stage by 0.4 or something like this to 2.3%. Same for Europe. We're going from 1.1% to 0.5% growth outlook. I mean, it is what it is. It's worth what it's worth for now until things change.
It is clearly, I think, in our view, an anticipation that the economy is going to be slower. Probably inflation will be higher in heavily hit sectors of the U.S. economy. It is very likely, most likely, that insolvencies will keep going up in that environment because the adjustment to that new world is going to take some time, and not everybody is going to do perfect. On the demand for trade credit, I think it is just the uncertainty. I mean, it is a natural phenomenon. When you start to see that the world is riskier, you start to think about, "How do I protect my business?" You start to look for people who might have answers.
We don't have an answer on where this all lands, but we do have means to look at your short-term counterparties and figure out how well they're doing, at least as good as anybody can. I think that's where the demand comes. It comes from, I would say, almost all segments in the market. There is obviously interest in looking at what we have to offer and seeing if that can be put to good use in the different segments that we operate in.
Thank you.
Thank you. Now we're going to take our next question. Just give us a moment. The question comes to the line of Benoit Valleaux from ODDO BHF. Your line is open. Please ask your question.
Yes. Good evening. Thank you for taking my question. A quick question on my side.
If I may, sorry to come back on the current economic environment, but can you maybe give us more color on the risk management action you've taken over the last, let's say, weeks and months, and maybe year to date in terms of number of action, in terms of your total credit exposure as it evolves, or maybe, for example, some figures regarding the potential reduction on your exposure to low-quality business? Second question, and I know it's quarterly only figures, but when I look, sorry to come back also on your loss ratio per geography, is there anything specific to mention for Latin America? Regarding North America, I also need to tell you a quarter, but it seems that there is an increasing trend in terms of loss ratios. I just would like to have your view on that. Maybe the third question is regarding cost.
When you look at your internal cost, in absolute term, it has increased by roughly 8% or EUR 14 million versus Q1 last year. So it's a significant increase. You mentioned, of course, you've made some investment. What has been the increase which is related to BI in absolute term within this EUR 14 million just to look at the, we'll say, underlying trend? Thank you.
Yeah. Let me start with the risk question. On risk management, as I said, we've kind of broken down the world in, let's say, 600 different segments that our economists look at. We track the effect of the measures that are actually being put in place because all the other ones can change so fast on each one of these sectors.
We drill down within those sectors and into the companies that are most likely affected and those where we have the biggest exposures or those where we have the weakest participants. There is a whole amount of work going on. By the way, this is no different than anything that we have done in the past. It is just more intensity because there is more action and there is more news coming. The news flow is actually stronger. We stay very close to our clients. I mean, I think our teams are busy. We are not sitting idle. We have been working on some of these sectors or industries for quite some time. I mean, we all know that the automobile industry is right in the bull's eye, the steel industry, the aluminum industry. These are all areas that our analysts are reviewing very, very diligently.
In terms of the quarterly figures, you mentioned the U.S. I think we had a couple of larger claims, I would say, at the beginning of the year, but that number has been coming down. I mean, again, it's 9% on one quarter. We are talking about something that if you look at it small enough, it's going to be volatile.
Exactly. For North America and LATAM, if you exclude I think one or two large claims that we have, I think the loss ratio is really benign.
Yeah. The other question was, what was Latin America?
Yeah.
Yeah. Look at Latin America. I mean, if you look back in the history of our business, it keeps oscillating from 0 to 100%. This is 4% on one quarter. This is really 1% of our yearly turnover. It's going to be volatile.
In terms of our investment, I mean, we are really to the letter sticking to our power of the core playbook, right? I mean, we're managing the cost very tightly, and we are deliberately investing in those things that we said we would. Those things that we said we would invest in have to do, of course, with BI, which has been a significant investment. I didn't mention that, I think, on the call, but we probably have between BI and debt collections 700 people at the end of the quarter. I mean, that's a very significant increase from, I would say, the 50 people or so we had four or five years ago. We're investing in the technology that relates to this area. We're investing in the data.
We're investing in the sales origination for the insurance business and in the technology in general because that's where I think the game is moving slowly but surely, actually not so slowly. We're really completely aligned with our plan. There is no surprise in these numbers. I just think there's not going to be a better time to invest. I mean, the environment is what it is. There's no reason to slow down the investment because I think we are also delivering on growth in these areas. We're creating something that has value for the future and which is differentiating in the market. The more we invest in data and technology, the more we learn about the power that it has and the value that it can have, both in terms of new revenues, risk-free revenues, but also in making our insurance business better.
That's pretty much what I would have to say.
Okay. Thank you very much.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for your name to be announced. Now we're going to take our next question. It comes to the line of Michael Huttner from Berenberg. Your line is open. Please ask your question.
Fantastic. Thank you for this second opportunity. I had three. One is Q2. What have you seen most recently? Has there been any because the tariffs came in after the end of Q1. The second is on tax. I think in tax, from memory, Q4, you put a big amount aside kind of thinking about what might happen going forward. Now the tax seems to normalize again. Is there anything to say here?
Have you been too prudent, or has the tax issue now settled? The last one is on the—oh, I've forgotten. It'll come back to me in a second. Sorry about that.
Maybe we start with the tax while you try to—
No, in Q4, the tax rate was—and it used to be usually in Q4, we had a higher tax rate. Last year, if you recollect, we booked some impact related to the worldwide 15% tax, the Pillar 2. I think it has an impact of EUR 2 million was booked in Q4. I think this year in Q1, we're just going through the normal computation. What needs to be highlighted too is the fact that, of course, our tax computation is depending on the results and the level of income tax of all our geography.
As we have passing on less results to our reinsurer, I think, of course, the reinsurance company that we have in Switzerland, taxed at 50%, is driving our average tax rate down compared to last year. It is really a mat ter of geography of results that drives the tax impact.
Yeah. And as pertains to your first question on Q2, I mean, there is really nothing to add here. All the comments I made pertain to where we are today, right?
Excellent. Thank you. Yes. The question was exactly on what Phalla said, the reduction in the cost of reinsurance from EUR 13 million to EUR 20 million. Is there anything particular here?
No, because it is just—you can see it is just the fact that we are passing on more claims to our reinsurers as it is reflecting the increase on our loss ratio. Nothing unusual, I would say.
This is where our tax treaty is playing its role.
Would that be—does it depend on the pattern of claims? In other words, would reinsurance cover you better if you had more smaller claims or fewer big claims? Is there some kind of difference here?
No. Remember our reinsurance schemes, we have three levels where you have the proportional auto quota share, 23%. That has not changed for years now. You have, of course, stop loss and excess of loss. As far as I know, there is no stop loss or excess of loss that has occurred for years now. It is really the quota share that is playing its role.
The last, if I may, the number which—I mean, all your numbers actually given the environment, very strong.
The number which appears particularly strong given the current environment is what I call reserve release, the 40-odd million. Is there anything here to say? Is that more related to past prudence, or is it just the quality of your reserving reflects its own change? I don't know.
The prior development is just—again, I think that our reserving policy has not changed. Of course, just reflecting what we used to do and what we're doing. Nothing in particular to be highlighted, Michael.
We've remained very consistent. Actually, that number hasn't moved now. You can see it on the page, right, for literally years, right?
Exactly. Yeah. No, that's outstanding. Excellent. Okay. Thank you.
Thank you. Now we're going to take our next question. It comes to the line of Pierre Chédeville from CIC. Your line is open. Please ask your question.
Yes. Thank you. A pparently, I was not in the line of question. I do not have a lot of questions left. Maybe a general comment because you said a lot of things regarding the evolution of the economic climate, etc. I am a little bit surprised by your tone, if I may say. You seem a little bit more, I would not say optimistic, but positive compared to your traditional stance on outlook, which is quite conservative. We can see this conservativeness in your targets, notably your targets on cost-income ratio. Combined ratio, sorry. What would you say regarding your outlook? Are you quite optimistic or pessimistic? My second question is a follow-up on reinsurance. Do you see any increase in premiums of reinsurance due to the current environment and what you said? Could it change a little bit or marginally your policy in this area? Thank you.
I think that, frankly, the two questions kind of participate in the same underlying question, which is what's going to happen? I think nobody knows. I mean, frankly, if you have a clue, let us know. Because as I said before, with such high numbers being mentioned of where the tariffs are going to land, it could be anything. I don't know if it's—I don't know if I can be positive or negative. I think we just don't know. We're going to have to see where the dust settles. We're going to have to do the work of going line by line and figuring out who's impacting and who's not. For me, it's not about being optimistic or pessimistic. It's about taking whatever the world is going to decide for us and dealing with it.
The only thing I can tell you is this business has been, over the years, investing in its people and its process and its technology and this and this and that. I think we're in as good a shape as we've been, but the environment is what it's going to be. There's not much I can do about it. I tend to try to worry about things I control and less about things I don't control, I think, is probably the way to think about it. As far as the reinsurance, I think it's the same thing. The question is, where is that going to be? I think at the end of the year is when we renegotiate our insurance contracts. I think in the next nine months or eight months, we're going to know a lot more about what's going on in the world.
That will, again, not be for me to decide, but we'll have to take whatever the market's going to give us.
Okay. Thank you.
Thank you. Now we're going to take another question. It comes to the line of Michael Huttner from Berenberg. Your line is open. Please ask your question.
Thank you. This last one, sorry. Demand versus volume. Which way do you think the coin settles? Is it up or down?
Demand versus—volume. What do you mean?
You've got your clients asking for more cover or being more worried, but the underlying world trade environment being more challenging. Which way?
It's hard to say because I think on one hand, it can be very different by sector, by area. I mean, increased inflation in the U.S. will drive activity in the U.S., but that's not our biggest region.
I would say a slowdown in the economy drives lower activity. I would say, in general, the commodities going lower is not helping our activity. That's never been a great thing for us. General uncertainty drives demand. For smaller clients who start to struggle, sometimes it also means they can't pay their premiums or they don't want to pay their premiums or whatever. I mean, it's a mixed set of things.
Even on volume, Michael, I think volume is driven by, first of all, the volume of activity of our customers. That might decrease if the GDP is going down. Inflation is pushing up the volume. At the end of the day, I don't even know where it's going. It's really the $1 million question.
A lot of unknowns here. A lot of unknowns.
Like I say, in light of unknowns, the numbers look really good. Thank you.
At least you know what the consequences are, but we do not know what the—we do not know what the cause is going to be.
Absolutely. Thank you very much.
Thank you. Dear participants, as a last reminder, if you would like to ask a question, please press star one one on your telephone keypad. Dear speakers, there are no further questions. I would now like to hand the conference over to Xavier Durand for any closing remarks.
Thank you very much. I mean, for all of you who have been listening in and have been asking questions. I mean, we did not mean to close this early, but I mean, I guess it is a good thing. Let us see. We will be speaking again, I think, on the 31st of July for the Q2 first-half results.
I just remind everybody the General Assembly of Coface takes place on the 14th of May. I guess to all of those questions about what the environment holds, I think we'll probably know a little bit more. Who knows? We'll see. Thank you for calling in, and looking forward to speaking with you soon.
This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Thank you.